Final Effort to Save Integration Ban Emerges Ahead of Lame-Duck Session

“It’s just lunacy,” Kenneth Plotkin, president of Hauppauge Computer Works, told us. “We were pretty alarmed. … We’re a single company. We’re not Time Warner Cable or Comcast.”

Hauppauge is one of the provision’s few opponents. TiVo has objected the most publicly, and Consumers Union, Free Press and Public Knowledge have objected, too. Sen. Ed Markey, D-Mass, also fought against the provision and stalled a Senate attempt to hotline STELA reauthorization over this provision in September (see 1409230043).

TiVo hired ex-Sen. Byron Dorgan, D-N.D., to lobby on its behalf beginning Sept. 15. The former Communications Subcommittee member is now with Arent Fox and the Bipartisan Policy Center. His lobbying registration form specifies that he will advocate for TiVo’s priorities on the Senate Commerce Committee STELA reauthorization bill, focused on the “provision related to ban on integration in set-top boxes.” By Sept. 30, the end of Q3, TiVo paid Dorgan $10,000, according to the firm's disclosure report.

Hauppauge, based on New York's Long Island, has a “vested interest” in CableCARDs, with “significant revenue” wrapped up in the technology, Plotkin said. He derided the repeal of the integration ban as “anti-consumer” and has tried to rally his customers against the Capitol Hill maneuvering. Plotkin plans to come to Washington this week to meet with the offices of Sen. Chuck Schumer, D-N.Y., and possibly with Sen. Kirsten Gillibrand, D-N.Y., to make his case. He sees challenges, pointing out that TWC is based in New York City.

TiVo plans to join Happauge for its Capitol Hill meetings this week, a spokesman told us. “TiVo continues to make its case with Senate offices that the Congress would be making a big mistake to take away consumers’ choice to use their own equipment to lower their cable bills.”

NCTA, TiVo Lobbying

Top officials from TiVo have testified before both chambers of Congress over the past year. TiVo has retained Grayling as its primary lobbying firm, paying $40,000 a quarter. Lobbying forms show that three of Grayling’s lobbyists -- Kim Bayliss, David Murray and Steve Perry -- lobbied on TiVo’s behalf on possible CableCARD language. Others also cite lobbying on the issue. Arris has retained Wiley Rein to lobby on STELA and CableCARDs all year, for instance. An industry official said Arris has focused on information-gathering rather than advocacy.

NCTA spent $11.96 million on lobbying across the first three quarters of 2014 and has many lobbying firms at its disposal. Industry officials and Hill staffers have described NCTA’s active influence in the debate, with significant pressure against Markey and in favor of the integration ban repeal.

“Since this unnecessary technology mandate went into effect in 2007, the integration ban has added more than $1 billion in increased costs on consumers that lease set-top boxes without any additional consumer benefit,” NCTA’s spokesman told us. He said the ban “adds $60 million to consumer residential electric bills. Only cable subscribers and operators representing just half the MVPD market bear these costs.”

“Getting a blatantly anti-consumer provision inserted in a pro-consumer bill behind the scenes, and getting it rammed through by a combination of obscurity, chicanery and log-rolling, is where that army of [cable] lobbyists earns their 6-and-7 digit salaries,” said Public Knowledge Senior Vice President Harold Feld in a blog post (http://bit.ly/1wwAH9a), emphasizing the need for consumers and other lawmakers to back Markey’s amendment despite the issue’s complexity. “If we can get enough Senators to stand with Markey and place a hold on the bill, then those who want the bill passed will either need to pass the Markey Amendment or strip Section 203 out of the bill altogether.” Feld said lawmakers will attach “the actual must-pass satellite TV part” of the legislation “onto a funding bill" ... “if we look like we’re gaining ground here.”

The extraneous integration ban provision became attached to the STELA reauthorization proposal without any hearings devoted to CableCARDs or process to hear from consumers, chided a veteran Hill observer who has followed the provision. He called the Senate Commerce Committee process leading up to the failed hotline very strange. Normally, committee chairmen are highly attentive to the concerns of their caucus, and Commerce Chairman Jay Rockefeller, D-W.Va., knew Markey felt passionately about the issue, the Hill observer said. It was very unusual and surprising for Rockefeller, within 24 hours of pledging to Markey that he would work with him before advancing legislation to the Senate floor, to try to hotline the proposal, he said. Rockefeller wrote that proposal with Senate Commerce Committee ranking member John Thune, R-S.D., who championed repealing the integration ban on behalf of the cable industry.

Plotkin said the repeal doesn't make technical sense and backs Markey's amendment, which calls for a successor solution before killing the integration ban. “To eliminate [the integration ban] before you’ve got a replacement makes absolutely no sense at all,” Plotkin said. “We’re just trying to get the word out.” The CableCARD is “an older technology” and not perfect, but it’s a unifying standard, he argued. “The beauty of CableCARD is that it’s an encryption standard supported by every cable operator in the United States.”

Three Scenarios

Congress returns in mid-November for the lame-duck session that will last into December. Three scenarios exist, all centered on the Senate, suggested the Hill veteran.

First, Senate lawmakers could try to file cloture on a STELA reauthorization proposal to force a vote and bypass any holds, but that would take four or five legislative days, said the veteran, doubting there’s sufficient time during the lame duck. That may compel the removal of the provision, he said. Second, Markey could hammer out a compromise and thus remove his hold. Or third, lawmakers could try to force through STELA reauthorization by attaching it to the continuing resolution fiscal bill, as industry lobbyists and a Senate staffer recently predicted (see 1410150090).

“What they’re really trying to do is have Congress kill CableCARD so they don’t have competition,” Plotkin said, urging myriad alternatives such as embedded conditional access. “Without CableCARD, there’s not a lot we can sell.” If lawmakers proceed with the repeal, Hauppauge's next steps will hinge on how the FCC responds, he said. The agency could go to the cable industry and say all could choose an encryption standard, but that may require a license with each cable company, he said. In that scenario, Hauppauge likely would get licensed with Comcast and TWC and ignore everyone else due to the expense, he said.

“Eliminating the integration ban does not affect FCC enforcement of a different rule that requires cable operators to offer a ‘separable security’ solution to retail devices,” the NCTA spokesman said. “Cable operators will still be compelled as a practical matter to support the 48 million CableCARDs already in leased boxes even if they do not have to deploy any more such boxes.”

“I’ve been in the computer business for close to 30 years,” Plotkin said. “Having a standard is so important.” He feared the possibility of 20 different encryption standards developing: “That would be absolutely impractical for a company like us.”